Tuesday, October 1, 2013

Self-Publishing: The Business License

You guys asked for it—so I'm gonna talk here and there about my journey through the self-publishing world. I am still a major newbie here, so all veterans are welcome to add their advice to those thinking about this path or those just starting out like me.

Today it's all about the business license.

There were so many questions I had starting out, and I kind of struggled finding the "nuts and bolts" information on self-publishing amongst all the "should I do it or not?" discussions. So this post gets into the practical, slightly dry information. I will provide the questions I've asked and the answers I've found thus far. If I find more answers or you ask more questions, I'll update this post with those.

Do I Need A Business License To Self-Publish?

My personal answer is YES—you should get a business license if you plan on self-publishing long term and for, ideally, significant profit.

Technically, though, if you are doing business under your given name, you do NOT need a business license as long as you report your income from self-publishing in your taxes.

But still, I'd get one. In fact, I did.

If you want to do business under a "company name" or if you want to incorporate, if you want to sell hard copies by hand or have legal protection—you might want to consider going through the tedious-but-not-that-difficult process.

What Are The Benefits Of Having A Business License?

I'd say the first benefit is being "legit." At least in your state and country's eyes. We all know taxes can be a nightmare as writers, and it's important to have the right documents to make sure it all turns out well. There are lots of ID numbers that are good to have as you report state and federal taxes.

Also, if you plan on carrying stock of your book (as in paperbacks or hardbacks) to sell personally, you'll need a business license in your state to do so. Ebooks are sold through online distributors so it's not as necessary if you're only doing online, but still a good idea.

There are many types of business licenses, but the two most people consider are "sole proprietorship" and an "LLC or incorporated thing-a-ma-bob (official term, okay not really)."

If you have a sole proprietorship, that basically means you are the only owner and likely only employee—you are responsible for all the things. It doesn't give much legal benefit, but it does provide you with a license that other businesses recognize. There are some POD (print-on-demand) distributors that you can't register with unless you have a business license number.

If you incorporate, there are more legal advantages. Mainly in the "protection" vein. It means if the IRS decides to audit your business gets audited, not you personally. It means if someone wants to sue you for stealing their idea or defamation or whatever, your business gets sued and not you personally.

There's other stuff, of course, but that's the basics from this newb.

How The Crap Do I Get One?

Oh, this is where the fun begins! Because every city and state is slightly different, so it's hard to say what, exactly, you might need to do to acquire your license. But I think I can give you a skeleton of the process that should help you start.

First, while there is information online, I found a lot of it confusing as a newbie. It was hard to know if I was doing it right or not. If you want the exact details on how to get a business license in your city, I highly recommend going to your city hall. Mine had a sweet lady who was solely in charge of business licenses, and she filled in all the gaps of my understanding easily. She confirmed I had some things right and gave me the rest of the forms I needed to fill out—plus she explained why I needed them. It was lovely in comparison to trying to wade through the online stuff.

But here is a digest of what I ran around trying to learn:

Phase One: Acquiring The ID NumbersBefore you can get a business license from your city, there are a lot of numbers you have to get first. They are: 1) Federal Tax ID 2) State Tax ID and a 3) Business Entity Number (if you are DBA [Doing Business As] another name than your own—if you are not, you likely don't need to register your given name as an entity).

I was able to acquire my Federal and State Tax IDs free of charge, and I say this because I almost got swindled by a website that looked like the Federal site but then asked me to pay a fee for registering. I assume this website was a scam. So be careful! The government is apparently happy to issue tax numbers for free—they want you to pay taxes, of course.

The Business Entity Number, at least in Utah, requires a fee to register. It has to be a name that hasn't been taken yet, of course. I think you can check with your state's registry to find out if your potential business name is already in use.

Phase Two: Meeting City RequirementsThis is where I can't tell you exactly what you need to do, as it varies city to city. But I can tell you there will likely be a few additional forms you have to fill out. Since I am doing business from my home, I had to fill out a "home occupancy" form. There was also a fire inspection form I had to fill out and sign in front of a notary.

Of course, there is a fee for the city business license, and it's something you have to renew every year. So once you get through all the tedious forms and waiting for stuff to show up, you're done! Unless you move...then you'd have to go through more forms, I'm sure.Once you turn in your city papers, you'll get an official paper that is your business license, and then you will dance and rejoice for having survived the forms. At least I did.

And those are the basics! If you have questions, you may ask in comments. But I'll be honest and say I can't guarantee a good answer, since I'm just learning myself. Maybe there will be smarter people amongst my readers who can. My readers are pretty dang intelligent, after all.

12 comments:

The biggest key, I think, is make sure you don't forget that you own taxes in your city. Not just fed and state. Cities get a little upset when you ignore them, and it takes many cities a while to figure out you ignored them, so they end up tacking on lots of penalties and interest when they find you. And they will find delinquent taxpayers eventually.

One thing California writers should consider is whether the fees and paperwork involved in setting up and running an LLC are justified. According to Nolo.com, in California, "both LLCs and corporations must pay an $800 annual tax to the Franchise Tax Board."

They do offer an alternative: "If it's lawsuits you're worried about, often a commercial liability insurance policy can shield your assets sufficiently (however, insurance does not cover unpaid business debts)."

You mentioned you were able to acquire a Federal and State Tax IDs free of charge. Where did you go to get them free of charge ?If you could e-mail me that information that would be greatly appreciated.. my e-mail address is people4profits@gmail.com Thank you so much Sincerely J Bailinisi

Hello I am so delighted I located your blog, I really located you by mistake, while I was watching on google for something else, Anyways I am here now and could just like to say thank for a tremendous post and a all round entertaining website. Please do keep up the great work. best self publishing

Natalie Whipple

I am an author and card-carrying nerd. My favorite areas of the nerd realm include anime, Korean dramas, good cheese, and playing mmorpgs with my family. I take pride in writing the weirdest books I can think of, and my novels TRANSPARENT and BLINDSIDED, HOUSE OF IVY & SORROW, and RELAX, I'M A NINJA are just some of my wacky ideas.